UBIT trial begins, judge orders witnesses excluded

GREEN BAY, Wis. (5/12/09)--The trial in the lawsuit brought by a Wisconsin credit union challenging the Internal Revenue Service's interpretation of the unrelated business income tax (UBIT) got underway Monday in a U.S. District Court in Green Bay, Wis., with the judge issuing a ruling to exclude witnesses who haven't yet testified from the courtroom .

The first morning of the trial in Community First CU v. United States of America resulted in the selection of an eight-person jury comprising five women and three men, according to Credit Union National Association (CUNA) General Counsel Eric Richard, who was present at the trial.

U.S. District Court Judge William Griesbach issued an order excluding witnesses who haven't testified yet from the courtroom. "The order 'discourages' those in the court room from reporting on the content of today's testimony," Richard told News Now.

Opening statements were made by the attorneys, Mike Conway of Foley & Lardner, representing the credit union, Appleton, Wis.-based Community First CU, and Allyson Baker, representing the government, said Richard.

Also Monday, the court heard testimony from the plaintiff's first two witnesses, Maurice Dresang, founder and retired CEO of the credit union, and Cathie Tierney, the credit union's current CEO. CUNA Vice President of Economics and Statistics Mike Schenk is scheduled to testify today, via videotape, on behalf of the credit union.

Community First CU filed suit in January 2008 against the government after the IRS determined that certain guaranteed auto protection (GAP) and insurance products offered to members fall outside the credit union's mission and are subject to UBIT. The credit union is seeking a refund of $54,000 it paid in taxes on credit life and credit disability insurance and GAP products (News Now May 11).

The credit union's lawsuit maintains that the revenue from the sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state-chartered credit union (News Now April 30).

The trial is expected to end Friday.

courtesy of cuna.org